IMF chief in Malawi to assess reforms

Updated at: 01/04/2013 10:07 AM
By RAPHAEL TENTHANI

(AP) LILONGWE, Malawi - The chief of the International Monetary Fund visited Malawi on Friday in a show of support for the southern African nation’s decision to pursue tough economic reforms despite widespread opposition to the measures.

IMF director Christine Lagarde met Malawi’s president, Joyce Banda, who has been criticized by domestic opponents for sharply devaluing the national currency in line with prescriptions from the Washington-based international lender that are designed to make the economy competitive.

Malawi, one of Africa’s poorest countries, is struggling with high inflation that has made the costs of goods and services difficult to afford for many citizens. Banda’s opponents plan to stage protests on Jan. 17 against IMF-backed measures, which include the loosening of restrictions on foreign currency exchange.

"Devaluation is a necessary economic reform initiative, but you cannot devalue the currency and let it float without necessary safeguard measures," said John Kapito, head of the Consumers Association of Malawi, a non-governmental group that is organizing the protests.

Banda let the currency, the kwacha, float freely against major currencies after assuming power following the death in April of President Bingu wa Mutharika, who had opposed such a move on the grounds that it would trigger inflation and ultimately hurt the poor.

The unpegging of the currency from the dollar led to a devaluation of about 50 percent, and the price of commodities soared.

Banda’s policy turnaround prompted Western donor nations and agencies, including the IMF, to inject hundreds of millions of dollars into the economy. They had withheld the badly needed funds because of Mutharika’s refusal to agree to IMF reforms.

Despite the cash infusion, Malawi’s population of about 15 million is struggling with inflation of more than 30 percent. Interest rates are an average of 36 percent, raising concerns about prospects for growth and investment.